Hospitals are letting doctors QUIT an official NHS pension scheme

Hospitals are letting doctors QUIT an official NHS pension scheme which is causing consultants to cut their hours amid a workforce crisis

• Ministers launched a review into the punitive pension rules back in August
• But some trusts say they can’t wait until a more flexible scheme is rolled out
• The British Medical Journal says at least 16 trusts have either set up or are considering some form of salary flexibility scheme 

Hospitals are allowing doctors to quit an official NHS pension scheme which is causing consultants to cut their hours.

Several NHS trusts are putting their own schemes in place amid mounting frustration over government inaction to reform a punitive tax on pensions.

Controversial pension reforms introduced in 2016 mean top consultants and GPs are cutting their hours to avoid a tax bill on their pensions that can run into tens of thousands.

A survey of 6,000 senior doctors by the British Medical Association revealed 70 per cent of hospital consultants and three quarters of GPs have either reduced their hours or are planning to.

Several NHS trusts are putting their own schemes in place amid mounting frustration over government inaction to reform a punitive tax on pensions

Ministers launched a review into the rules in August, and have proposed a more flexible scheme from April 2020.

But some trusts say they can’t wait until April and are already allowing doctors to opt out of the NHS scheme and receive employers’ contributions in cash, while others are being forced to use agency staff to cover gaps.

The British Medical Journal reports today that at least 16 trusts have either set up or are considering some form of salary flexibility scheme.

Others have run seminars on pensions taxation and enlisted independent financial advisers to speak to staff about how to avoid a large tax bill.

One trust to introduce its own pensions scheme is Dorset County Hospital NHS Foundation Trust.

Mark Warner, from the trust, said: ‘In the absence of a national solution we felt we had to do something to address the operational concern of people reducing their working capacity.

The BMA says the pensions crisis is the ‘greatest immediate threat’ to patient care. Doctors are being penalised by tax charges on their pensions that have significantly increased under Treasury rules introduced in 2016.

Under the new rules, anyone earning more than £110,000 a year will be hit with a tax charge if they put more than £10,000 into their pension pot each year. Previously, they could pay up to £40,000 into their pension pot a year tax-free.

These rules affect all high earners but doctors – whose average salaries are more than £100,000 a year – are among the hardest hit.

Growing numbers of doctors in their 50s are choosing to retire altogether as their take-home pay has been so substantially reduced by the charges.

And many younger colleagues are cutting down on their shifts with the aim of reducing their salaries and thereby avoiding the tax penalties.

This is leaving GP surgeries and hospital wards severely understaffed and resulting in longer waiting times for patients, including for cancer scans.

A Treasury review will includes reforms from the Department of Health which would give doctors far more flexibility on the amount they pay into their pension pots each year.

Currently, doctors have to put in 14 per cent of their salaries into their pensions annually. 

But the new system will enable them to pay in a much smaller amount and avoid the tax charges, taking the money as their salary instead.

WHAT CHANGES HAVE BEEN MADE TO THE NHS PENSION SCHEME? AND HOW ARE THEY AFFECTING STAFF?

The NHS introduced changes to its pension plan in 2016.

This means senior staff are now more likely to suffer an annual tax charge on their pension contributions, as well as a lifetime allowance charge on their overall pension pot. 

Pension contributions are not taxed so long as they do not exceed annual or lifetime allowances. 

People of all professions usually pay tax on their pension if the total contributions for that year exceed the annual allowance (AA), which is currently £40,000 ($49,793).

And if the pension pot is worth more than the lifetime allowance, which is currently £1,055,000 ($1,315,310), a person will also pay tax on it.

Although the AA has been £40,000 since 2014, it can go to as low as £10,000 ($12,447) if a person is subject to tapering. 

In the NHS pension scheme, the amount a person puts in each year is multiplied by a factor of 16-to-19. Therefore small increases in pensionable pay can generate very large growth.

Tapering occurs when the taxable income exceeds £110,000 ($137,142).

If the income is more £110,000, a person needs to calculate their adjusted income.

If this is more than £150,000 ($187,026), the AA tapers by £1 ($1.24) for every £2 ($2.48) that their adjusted income is above £150,000.

In the case of a consultant with a pension growth of £100,000 ($124,673) but a threshold income of £110,000, they retain a standard AA.

But even as little as £1 of additional income would result in AA reducing to the minimum of £10,000. 

This £1 of extra income could increase the tax payable by £13,500 ($16,811).  

Many consultants only realised this years later. The BMA predicts 30 per cent of the medics have been affected.  

Opting to earn less causes a medic’s pension pot to grow more slowly, which reduces their risk of being hit with a tax bill.  

Full-time doctors are typically contracted to work 10 shifts, each lasting four-to-five hours, a week.

However, consultants usually go above and beyond this by working 11 or 12 shifts to keep up with demand. 

They get paid overtime for this additional work, which can then affect their pension. 

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